Annexes to SEC(2011)1294 - Executive summary of the impact assessment - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | SEC(2011)1294 - Executive summary of the impact assessment. |
|---|---|
| document | SEC(2011)1294  |
| date | October 27, 2011 |
Option 2 ("EU Best practice") develops a more comprehensive package of reforms based on widely recognised global best practices in major hazard risk control. These would be mandated EU-wide and environmental risk assessment would be incorporated into the MHR. This option would lead to further improvements also in the North Sea region and would create preconditions for EU-wide regulatory dialogue amongst competent national authorities.
Option 3 ("EU Agency") further reinforces the impact of Option 2 by introducing an EU agency to institutionalise and thereby consolidate the reforms achieved by option 2. It would undertake inspections and investigations, monitor and enforce consistency in performance, develop intervention capacity and assist capacity building in adjacent non EU countries.
Each option is constituted by a set of specific measures, some common to more than one option, some option specific. For example, as Option 1+ builds on Option 1, it includes measures from Option 1 and complements them with some others. Option 2 contains in part additional measures, partly retains measures included in the previous options but implements them by different means. This reflects the fact that a measure can be implemented by different means, often offering a trade-off between effectiveness and complexity/practicality.
The measures have been derived through stakeholder consultation and research. The table below gives a complete list of measures and their presence or absence in individual options; it also indicates the general implementation means for each measure within different options. As result, each of the policy options is characterized on one hand by the set of measures retained in the option and by the preferred implementation means for each measure under that option.
No. || Measure || Option 0 || Option 1 || Option 1+ || Option 2 || Option 3
1 || Detailed verification of the technical capacity of potential operator || 0 (= not done) || 0 || G (guide-lines) || L || EU agency
2 || Establishing regular inspections and a penalties regime || 0 || Law || L || L || EU
3 || Submission of formal safety assessments for acceptance by the regulator || 0 || L || L || L || EU
4 || Extension of MHR into a comprehensive risk management model || 0 || 0 || 0 || L || L
5 || Extending EU practices to overseas operations || 0 || 0 || G || G || EU
6 || Establishing a Competent Authority || 0 || 0 || 0 || L || EU
7 || Establishing a platform for regulatory dialogue || 0 || 0 || 0 || L || EU
8 || Comprehensive information sharing and transparency || 0 || 0 || 0 || L || L
9 || Preparedness for effective emergency response to major offshore accidents || 0 || 0 || G || L || EU
10 || Ensuring cross-border availability and compatibility of intervention assets || 0 || 0 || G || L || EU
11 || Clarifying the scope of environmental liability || 0 || 0 || G || L || L
Table 2 Comparison of policy options
In addition to the measures listed in table 2, three other measures have been identified dealing with (i) product safety, (ii) financial capacity guarantees and (iii) compensation schemes for traditional damages. These measures would act on the drivers listed in table 1 but they are insufficiently mature to be included in this impact assessment, and are deferred for separate assessment.
5. IMPACT ASSESSMENT OF OPTIONS
The impact assessment evaluated each option regarding the extent to which it mitigates the risks, its impact on compliance costs of EU MS, industry and the Commission, and the wider non quantifiable impacts (social, economic and environmental).
Option 0 (no EU action) has no additional cost nor impact on the baseline cost range €205-915m7. It does not affect the problem drivers consistently across the Member States. While some improvements in national legislations and Member State and industry practices are expected, their effect may be counterbalanced by increase in risk levels due to growing complexity of offshore operations (more complex and remote drills, etc.).
Option 1 results in an increase in compliance costs of ca €36m/year, falling mainly on the industry. The option secures consistent risk assessments by industry and regulators, an upgraded sanction/penalty regime and a partial improvement in the safety culture of industry. The resulting reduction in risk expressed against the baseline cost is estimated at ca €7 – 30m/yr, an average 3% decrease in baseline risk.
Option 1+ introduces additional running costs on Member States of ca. €3m and a further €16m on industry so cumulative industry compliance costs become ca €52m. It secures limited improvement in technical capability verification; clarifies the liability of operators for pollution; and formalises the goal of making emergency assets and plans suitable for sharing across MS borders. It begins to secure some influence for EU to raise global standards. The benefit of Options 1+ is €25 - €109/yr, an average 12% reduction in baseline risk.
Option 2 represents additional annual compliance/implementation costs for industry of €70m making a cumulative industry total of ca €122m; a further €9-15m administrative costs are calculated making a cumulative sum of ca €12 – 18m for Member States, plus one-off administration costs of ca €18 -€44m. It addresses all of the identified problem drivers. The measures under this option together cut the baseline risk costs by between €103 – 455m/year - a 50% reduction in baseline risk.
Option 3 consolidates the benefits of option 2, promotes regulatory coherence, offers technical assistance to new or evolving national regimes and strengthens coordination and transparency. However, risk base regimes fear it could reduce benefits by compromising regional or national priorities with institutional, or averaged, objectives. It introduces annual running costs for the Commission of c. €34m/yr and €18-44m one-off start-up costs plus €10's million for purchase of capital response assets. Compliance costs for industry and Member States, and overall benefits under the option are comparable with Option 2.
6. PREFERRED POLICY OPTIONS AND LEGAL INSTRUMENT
The preferred policy option is Option 2, i.e. a comprehensive offshore reform raising throughout EU, through new law, the level of risk management and emergency preparedness in the offshore industry to best practices. Apart from consistency this option increases greater transparency of industry and regulator performance.
This option can in the most decisive way (50%) reduce the baseline risk through enhanced prevention and mitigation should an incident nonetheless occur. The risk reduction in average monetary terms (ca. €279m p.a.) compares favourably with the estimated cumulative costs of its implementation (€12-18m p.a. in administrative costs for Member States and a €122m p.a. in compliance costs for the industry). Option 2 is more affordable administratively and economically as the additional running costs of Option 3 (ca €34m p.a.) fail to bring corresponding decrease in risks. Option 1+ is a choice with modest positive impact (12%) and modest enforcement possibilities while the benefits of Option 1 are insufficient to justify the costs – albeit small. Among the stakeholders, the NGOs and classification societies tend to favour changes more than regulators and, in particular, industry.
A Regulation is proposed to implement Option 2. It has advantages over a Directive due to its clarity, consistency and speed of implementation through direct application[9] and because its primary purpose is to secure conformity of application of regulations where currently implementation is fragmented amongst Member States. By acting directly on the industry, the Regulation would also provide for a more level playing field. It would also cater well for emergency planning to fight transboundary pollution.
7. MONITORING AND EVALUATION
An evaluation of the effects of the Regulation should be done not later than five years from the entry into force of the legislation. Safety performance indicators and data on compliance verification activities should be used in that context (See IA Chapter 8). The proposals to improve transparency and reporting are expected to facilitate evaluation and monitoring and compare offshore risks across the EU.
In addition, regular meetings with the competent authorities will allow the Commission to monitor the sector. They will also help knowledge sharing between traditional and new EU offshore regions.
[1] §. 2.1 IA document.
[2] E.g. Brent B 2003, Gullfaks C 2010 , Ganneth F 2011
[3] Assuming a recurrence rate of 35 years for a major incident and an average economic cost range of €5 billion (clean-up only) - €30bn (full economic cost), this amounts to costs of €140 - €850 million p.a.. Add to this an estimated €65 million of annual property losses resulting from more common less serious documented accidents. These estimates are based on detailed probability and accident statistics analyses in Annex I.
[4] http://www.ptil.no/news/rnnp-2010-major-challenges-in-important-areas-article7810-79.html
[5] Oil & gas leaks, failures of production process safety and well control; failures due to invalid design change; maintenance backlogs.
[6] E.g. fishing, tourism, sometimes ports, agriculture.
[7] E.g. Moratoria in the Gulf of Mexico 2010, Italy today and in 1988 in the UK (Ocean Odyssey accident)
[8] § 2.1 IA document.
[9] There has been a preference for Directives in legal acts covering high risk/ high value industries (e.g. IPPC, SEVESO II Directive), whereas narrower high risk sectors (e.g. civil aviation) often use Regulations.